Income Inequality

Corporate America Worried That Educating Wage Slaves May Hurt Morale

“Just subtract that $20 million bonus and we’re basically being paid the same!”

By Christopher Goodney/Bloomberg/Getty Images.

Of the many aspects of Dodd-Frank that the business world despises, the rule requiring companies to disclose the pay ratio between their C.E.O. and median worker really sticks in the craw. The rule was finalized in 2015, but after Donald Trump was elected, companies breathed a sigh of relief. Surely he of all people would understand the necessity of keeping employees in the dark. Unfortunately, while the president has been hard at work rolling back everything from the rules governing loan sharks (loosen ‘em!) to the ones requiring employers to report workplace injuries (not necessary!), the pay-ratio rule seems to have slipped through the cracks.

Now, companies must start disclosing the dreaded figure and, spoiler alert, they’re pretty nervous about how their less richly compensated employees are going to take it. “I don’t think companies are as worried about newspaper articles, because they are what they are, and I don’t think they’re worried about shareholders,” David Wise, a senior partner at Korn Ferry, toldThe Washington Post. “I think they’re worried about how their own people will react. How do you communicate to an employee who now knows they’re paid in the bottom half of the company?”

So far, just 20 firms have released the ratio, according to research firm Proxy Insights. At Umpqua Holdings, a regional bank, it was roughly 55 to 1. At Teva Pharmaceuticals, it was 302 to 1—though, according to Teva, which recently announced some 14,000 job cuts, its ratio wouldn’t have been so glaring if not for a one-time award to its C.E.O. of $10.2 million last year. (Now that that’s cleared up, rank-and-file employees presumably have nothing to complain about.) Apollo Global Management’s ratio was 1:1, if you exclude C.E.O. Leon Black’s $91 million in dividends from stock holdings, as Apollo made sure to do. And at industrial juggernaut Honeywell, where C.E.O. Darius Adamczyk took home $16.5 million last year, the ratio clocked in at a deeply awkward 333 to 1. According to Bloomberg, the median Honeywell employee was paid $50,296, and half of Honeywell’s 131,000 workers earn less.

Making the C-suite extra uncomfortable is the matter of Trump’s early Christmas present to corporate America: that big, beautiful tax cut, which some workers could theoretically use as an excuse to demand greater pay equality. “There may very well be heightened expectations from employees who are paid in the bottom half that incremental tax-cut dollars are going to be used to enhance companywide pay programs,” said Wise. “That would be a very understandable reaction given the timing of everything.”